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For some reason, the oil market is always spoken of in hyperbolic terms. A pending dispute between two nations can double oil prices within a matter of months. Or peak oil worries set in and prices will skyrocket as production declines. Today, the new theory is that we are at a point of peak demand, and the decline in OECD demand will lead us to a more rosy energy outlook on the horizon.

There is one thing that we should all give pause to before immediately reacting to news like this: demographics. The sheer size of the global population and the disparity in global economic wealth make the concept of peak oil demand much more difficult to realize than we can possibly imagine.

One Shot, One BeerOne of the general ways that we look at the world is by dividing it up into the slow growth, developed economies and the fast growing, developing economies. Right now, oil demand for the two categories is roughly even at about 45 million barrels of oil per day. But that is just about the only metric where these two groups of nations are equal. There are 4.72 times more people in the developing world, which means that per capita use of oil is considerably smaller than that of developed nations.

Population (billions)

Oil Demand (in million barrels per day)

Per capita oil demand (gallons per person*day)

OECD member nations

1.247

45.581

1.595

non-members

5.89

44.187

0.314

Source: Organization for Economic Cooperation and Development and BP statistical review of world energy, authors calculations.

As developing economies advance, it is assumed that they will consume more oil. So for oil demand to remain flat, developing nations would need to reduce their consumption by an equal amount. It can be hard to conceptualize very large numbers like global GDP and world oil demand, so let’s make a comparison that almost everyone can understand: drinks. If every person in the developing world were to increase their oil consumption by one shot glass a day, those in developed nations would in turn need to use 1 beer can of oil less in order for global demand to remain flat.

What is even more humbling is that those numbers only account for current population. If we were to assume per capita oil consumption were to remain flat between now and 2030, then the projected increase in population would require an increase in production equal to both Exxon Mobil Corporation (NYSE:XOM) and Chevron Corporation (NYSE:CVX) more than tripling their current oil production over that time frame…just to maintain the status quo.

More than just US and ChinaWe all have a tendency to use the US and China as the bellwethers for the developed and developing world, respectively. The thing is, there are many places in the developing world that are not going to behave like China. In fact, based on projections from the OECD, China’s population is expected to peak in 2025 and then decline while the rest of the developing world is expected to grow by 2 billion people. More importantly, the places we expect to see the largest gains in population growth have some of the lowest fuel consumption.